Check writing point of sale system

ABSTRACT

A point of sale system designed to accept payer account number input with a subsequent debiting of a payer account and crediting merchant&#39;s account for the goods or services provided. Point of sale terminals are designed to accept bank account information by manually keying, MICR reading of a payer check, OCR reading of a payer check, magnetic stripe reading of a payer debit card, or electronic reading of a payer smart card. Thereafter, the transaction information is transmitted to a central computer system which stores the transaction event information for subsequent bank reconciliation via the ACH or other competing network. The invention eliminates the need for paper checks with all bank reconciliation being accomplished electronically. Additionally, there is no need for the present system to retain the check after verification.

RELATED PATENTS

This application is a divisional application of U.S. application Ser.No. 09/562,303, filed May 1, 2000, now U.S. Pat. No. 6,283,666 which isa continuation of U.S. application Ser. No. 08/775,400 filed Dec. 31,1996, now issued as U.S. Pat. No. 6,164,528.

This application is an improvement of U.S. Pat. No. 5,484,988 to Hillset al. entitled “Check Writing Point of Sale System.”

FIELD OF THE INVENTION

This invention relates to the field of Point-of-Sale systems and moreparticularly to the integration and processing of purchases whereby acheck or encoded card is used as the basic source of identification ofthe individual and of the individual's bank and whereby the bank accountis debited electronically.

BACKGROUND ART

Numerous devices exist for processing checks. For example, U.S. Pat. No.4,933,536 to Lindemann, et al., describes a check processing devicewhich is used together with a Point-of-Sale terminal. This particulardevice involves copying and taking a picture of an individual whereby adishonored check could then be traced to the person who has offered it.

U.S. Pat. No. 4,810,866 to Lloyd, Jr., describes a check validationsystem again located together with a Point-of-Sale system for imprintingand otherwise physically dealing with a check.

Other systems also deal with an apparatus for handling checks at a pointof sale. For example, U.S. Pat. No. 4,743,743 to Fukatsu describes onesuch transaction apparatus where a check is examined by a reader. U.S.Pat. No. 4,672,377 to Murphy, et al. describes a check authorizationsystem wherein a check is imprinted with a bar code and informationconcerning customers which are stored in a database. U.S. Pat. No.3,845,470 to Schuller discloses a vending system using a modified formof a check which is imprinted with identification codes, when someoneattempts to use the check in purchasing goods and services, a vendingoperation will not place the order if information associated with thecheck is not valid in a particular database.

Other check-based financial systems have also been the subject ofinvention. U.S. Pat. No. 4,617,457 addresses an ATM or automatic tellermachine form of cashing checks. Such systems create a picture of thecheck involved and also involves checking against a specialized databaseto insure that the check is a “valid” one (see also U.S. Pat. No.4,580,040 to Granzow et al.).

Another generic category of financial systems deals with methods ofhandling the financial transactions apart from the physical handling ofthe check itself. For example, U.S. Pat. No. 3,824,544 to Simjiandescribes a merchant issued “check” which can be used in the purchase ofgoods and services and upon purchase, a specialized code is evaluated todetermine if the check is being validly utilized.

U.S. Pat. No. 4,404,649 to Nunley et al. describes a document processingsystem which generally discloses a method of reading checks forprocessing a wide variety of financial documents.

U.S. Pat. No. 4,523,330 to Caine also describes a method for processingfinancial documents which systems also includes a Point-of-Sale terminalfor generating image data from checks as they are being processed. Thispatent is drawn principally to the actual terminal itself.

U.S. Pat. No. 4,673,802 to Ohmae et al. describes a central processingsystem having stored data relating to the counts of users. Users areapproved or disapproved at the Point-of-Sale based upon information inthe database.

U.S. Pat. No. 4,270,042 to Case discloses a point of sale system thatrequires a consumer to prepay a sum of money into a special account thatis accessed only by the system. This amount is inscribed on the card,and when a transaction made using the system, the amount of thetransaction is punched out of a designated area on the card. This amountalong with a signature and other information, is supplied on a draftnegotiable instrument, which is given to the merchant at the time of thetransaction. Thus, the Case system does away with the use of bank checksin effecting the transaction, but requires the use of specializedprepaid draft negotiable instruments that must be surrendered to themerchant.

U.S. Pat. No. 4,823,264 to Deming discloses a home banking system thatcan be used to transfer funds to different payees in satisfaction ofdebts incurred through previous purchases, use of utilities, etc. Thesystem is consumer driven; that is, it is contemplated for use by thepayor on a home personal computer. While the Deming system does awaywith the use of bank checks, account and other information must be keyedinto the system. The Deming system cannot be used to read account andother information directly from an ordinary bank check and has no usefor bank checks as instruments other than negotiable paper. Further, theDeming system cannot be used to transfer funds at the time of purchaseand is not workable at the point of sale; the system can only be used topay debts that have been incurred in the past and have accumulated.

Finally, U.S. Pat. No. 4,678,896 to Carlson et al. describes aPoint-of-Sale system whereby an apparatus is provided to secure theprocessing and imprinting of checks.

All of these above patents deal with the specific problem of how toaccept a check from a customer for the purchase of goods and services.They do not in any way address the subsequent processing of checks nordo they address the process by which checks are cleared through thenormal automatic check handling clearinghouse operations that exist inthe financial world. Thus, the interaction of these systems with theautomated clearing house (“ACH”) process is not addressed in any way.This is particularly important since if any Point-of-Sale check handlingsystem is to interact with the ACH mechanism it must adhere to thatprocessing scheme and must lend itself to use with a processing scheme.

Further, some of the currently used systems described above require theuse of a bank check as a negotiable instrument which must be surrenderedto a merchant. Some of the systems do away with the use of a bank checksaltogether, but require a debit card or a specialized draft instrumentto be used only with the particular system. None of these systemscompletely does away with the need and use for a negotiable draftinstrument while using the consumer's bank check for identification andverification only. That is, current technologies such as checktruncation, electronic check presentment and representment all require aconsumer's initial issuance of a “paper” check. It is therefore anobjective of the present invention to provide such a system.

It is an objective of the present invention to be adaptable for use withthe ACH system and to be smoothly incorporated into it. In this fashion,the present invention will immediately be useful for a much wider rangeof financial transactions above and beyond those contemplated anddisclosed in the background references discussed above.

SUMMARY OF THE INVENTION

The present invention comprises a process and apparatus which may beemployed for the purpose of effecting payments for point-of-salepurchases of goods and services paid from consumer funds secured in bankchecking or depository accounts. Each sale or “Transaction Event” wouldbe an electronic and “paperless” event thereby eliminating reliance onaccepting and processing commercial bank drafts (personal or corporatechecks) and the physical handling of those bank drafts thus replacingcommercial bank drafts at the point-of-sale.

In contrast to known systems, the present invention is a merchant drivensystem that can be used to process a transaction at the point of saleand at the time of purchase. The system is intended to be made availableto subscribing merchants, businesses, and individuals herein referred toas “system subscribers” wishing to employ the method and apparatus ofthe present invention for the electronic processing and settlement ofconsumer purchases. Further, operational parameters of the presentinvention allow freedom from customary state or other geographicallylimiting criteria typical when accepting and processing “paper” checks.The system is designed to act with the national authorization networksand the electronic settlement network known as the ACH system asregulated by the National Automated Clearing House Association (“NACHA”)or other comparable systems including but not limited to ECCHO, theCactus Switch, First Tennessee Bank, regional networks, the VISAnetwork, and others. The present invention contemplates TransactionEvents processed in a manner hereinafter referred to as “ElectronicChecks” or “Electronic Checking.”

The system is designed to perform in a fully automated manner enablingeach Transaction Event to be processed by a system subscriber as apoint-of-sale transaction in the presence of the consumer. Subsequent toa Transaction Event's being “Approved”, funds are debited from anauthorized consumer account for credit to the system subscriber, andelectronic settlement by ACH deposit of the transaction amount to thesubscriber's designated depository account. Authorized access toconsumer accounts and credits to system subscriber depository accountsare performed as “Off-Line” transactions by means of Electronic FundsTransfer (“EFT”) through the ACH Network or through the Federal ReserveSystem. “On-Line” transactions are also contemplated by the presentinvention once national networking and other present and proposedsupport mechanisms have become functional.

The present invention comprises a point-of-sale processing system havingelectronic data processing equipment which supports various individualservice selections or transactions types each of which provideautomated, electronic processing from consumer bank checking ordepository accounts in payment of goods or services incurred at a systemsubscriber's point-of-sale. It is the objective of the present inventionto automate the point-of-sale environment for processing consumerpurchases of goods and services would customarily necessitate the moretraditional acceptance and processing of commercial bank drafts(personal and/or corporate checks). Individual Transaction Events areadministered under the system of the present invention by initiating aterminal authorization inquiry and continuing through the electronicsettlement of funds representing the Transaction Event. As a result ofthe above procedure, approved consumer banking accounts are debited andsystem subscribers' designated depository accounts are credited.

It is a further objective of the present invention to eliminate the needfor “paper” checks as an accepted means of consumer payment. In theplace of personal and business checks, consumers would be providedgreater access to funds secured in bank accounts to effect purchasesinitiated from the point-of-sale. System subscribers electronicallycommunicate with the data center of the present invention for individualTransaction Event authorizations which, upon reconciliation of a day'sactivity, result in an EFT processed by means of the Automated ClearingHouse accommodating an “Off-Line” or “On-Line” debiting of preauthorizedconsumer Transaction Events from approved accounts. Thereafter, eachsystem subscriber is credited with the total of all such dailyauthorized Transaction Events to its designated bank depository account.The present invention also accommodates paper transactions as requestedby the subscribing merchant or consumer. By way of example, transactionscan be supported where the consumer prepared a “paper” check. Thetransaction would proceed in a fully electronic manner with the consumerretaining the “paper” check as an additional receipt.

The present invention comprises logic which allows the followingservices each of which, when individually performed or are combined withother services, establish a wholly unique processing medium enablingpreauthorized access to consumers' checking account or bank depositoryreserves in payment of and settlement for purchases conducted from asystem subscriber's point-of-sale.

Authorization—This service supports electronic communication frompoint-of-sale to the system's central computer. The data center storespositive and negative files concerning consumer accounts therebyproviding accurate inquiry responses regarding the current postingstatus of a consumer's banking account and signaling the systemsubscriber that said account may be reasonably relied upon forconsummating a Transaction Event (i.e., an “Approval”) or, here listedas delinquent, indicating that the account may not be so relied upon(i.e., a “Denial”). The system also contemplates “On-Line” services thatwould also permit Fund Verification.

Check Replacement—This capability operates as an extension ofAuthorization enabling the system subscriber the capability ofcompleting a Transaction Event by electronically logging the salewhereupon a Transaction Event slip will be printed or manually preparedfor consumer execution at the point-of-sale. By execution of theTransaction Event Slip, the consumer authorizes the electronicprocessing of funds secured in his/her authorized banking count in lieuof the more traditional method of issuing personal and business checks.Funding settlement to the system subscriber would be effectuated bymeans of Electronic Funds Transfer via ACH, the Federal Reserve systemor other competing facility as opposed to physically processing andtransferring checks among banks. If preferred or requested by thesubscribing merchant, the present invention would further allow for aconsumer's check to be written and thereafter voided, canceled, andreturned to the consumer, or, in the alternate, submitted to lock box orsimilar storage facilities.

Bank Transaction Card—As part of this invention an “Off-Line” Debit Cardis established on which is stored the information relating to thebanking account from which funds representing the Transaction Eventwould be debited for payment to the system subscriber. This informationmay be stored on the card itself in encrypted or unencrypted form or maybe stored in the central computer where access to such information isgained via special control characters or access codes stored on thecard. Electronic authorization for withdrawal of funds from thecardholder's account and subsequent electronic settlement proceduresremain essentially identical to processing under the Check Replacementservice described above. Information relating to the consumer-cardholderand the appropriate banking account to be debited for a TransactionEvent will be encoded upon the Magnetic stripe portion of the plastic,and terminal-readable, card. The present invention is also compatiblewith SMART card technology.

Thus, the overall objective of the present invention is to provide andsupport an alternate means for consumer payments for goods and servicesthat operates to replace commercial bank drafts in the point-of-saleenvironment. Simultaneously, the present invention assures consumersgreater access to and use of funds in personal or corporate bankingaccounts. Further, the system provides system subscribers asignificantly improved prospect of collecting the underlying monies forTransaction Events, reduced time for collecting the cash receipts fromTransaction Events, and a pronounced lowering of the present cost ofcumbersome procedures otherwise mandated by the existing mechanisms foraccepting and processing commercial bank drafts.

A further objective of the present invention is to significantly reducethe use of checks as negotiable instruments in effecting the purchasesof goods or services and to provide the system's Electronic CheckingService as an equitable alternative for the consumers reliance on creditcards or cash.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT

The method of the present invention begins with the electronic capturingof consumer information at a system subscriber's location using apoint-of-sale terminal and related equipment. This information isobtained in the presence of the consumer and occurs prior to any“Approval” for the Transaction Event or for the ultimate crediting ofthe System subscriber's designated depository account.

A Transaction Event involves a series of events initiating with a systemsubscriber's intent to sell goods or services, the payment for whichwould be funds secured in a consumer's banking account. The consumer'sbanking account status would first be verified by accessing the centralcomputer files of the present invention. Verification is performed byuse of an encoded, magnetic stripe card, where presented by the consumeror by input of account numbers from a consumer's specimen check. Thepresent invention also contemplates compatibility with “SMART card”technology, whereby a consumers “ChequeMark Card” information mightco-exists with other consumer data or payment options for alternateverification purposes. In addition to verifying a consumer's account, amore traditional identification of the consumer could also occurincluding visual examination of driver's license or similar andacceptable picture “ID”, however, this is not considered part of thepresent invention.

For improved identification, security, and fraud purposes, the system isfurther capable of receiving input of a consumer's Social SecurityNumber and retaining the same for use in the approval and settlementprocesses. The present invention is also capable of validating a SocialSecurity Number, screening out those numbers issued to individualsreported as deceased, and cross-searching the “known” (“Positive”)checkwriter database to verify the status of all banking accounts.Cross-searching is seeking a match of the Social Security Number withany over account on which there is a return, including the account whichis the subject of the current inquiry. If preferred or requested byeither a subscribing merchant or the affected consumer, the consumer'scheck could be written and, subsequent to processing through the systemof the present invention, marked as “Voided” or “Electronically Settled”and returned to the consumer. In the alternative, the consumer's checkmay be submitted to a lock box or other storage facility.

As an integral portion of each Transaction Event, the systemsubscriber's location, date and time, and requested sale amount isautomatically logged into the system when a system subscriber firstaccesses the invention. Finally, a Transaction Event Slip (“Sales Slip”)will be produced by a printer integral to the point-of-sale terminal andwill be executed by the consumer in the amount of the stated purchasewith inscribed language defining the Transaction Event and specificallyproviding consumer authorization for electronic access to his/herbanking account. The consumer's specimen check is returned unused or,where written, is returned to the consumer as a receipt. Thereafter, theconsumer account will be debited and the proceeds credited to the systemsubscriber's designated depository account along with all other similarTransaction Events representing the total of the system subscriber'sdaily activity. Debiting of consumer accounts and settlement deposits toeach system subscriber is performed by means of Off-Line electronicfunds transfer through and by the ACH or Federal Reserve System. Othercompeting facilities such as, but not limited to, ECCHO, Cactus Switch,First Tennessee Bank, regional networks, or the VISA network, could alsoutilized by the present system. The system has the further ability toconvert settlement processing to an “On-Line” format which would involveservices such as “Funds Verification” (Authorization) or “Reserving ofAvailable Funds” or a combination of both.

Equipment Configuration—The present invention can operate with nearlyevery conceivable point-of-sale equipment system. The central computersystem accepts data transmitted from the system subscriber's existingpoint-of-sale equipment or that which is added to augment serviceperformance. The point of sale terminal of the present invention isimplemented in a number of ways, most preferred, however, beingactivated under a fully automated format. Such a fully automated systemgenerally comprises a dual-port terminal with magnetic stripe readingcapabilities interfaced with a logging printer capable of providingindividual Transaction Event Slips for consumer execution, and a MICRcheck reader, optical character recognition (“OCR”) equipment, or otherdevice. It is contemplated that services may also in the future beadministered using the present invention with a singular point-of-salehardware device which, as a function of its design, would incorporateall or most of the service capabilities of an integrated terminal,logging printer, and MICR Check Reading device. The present inventionalso anticipates supporting existing point-of-sale equipment primarilydedicated to bankcard (“credit card”) processing and other equipment.Therefore, service subscriber activations may be supported undernumerous means of access from the point-of-sale. For example, personalcomputers and electronic cash registers in addition to variations of themore traditional stand alone transaction processing equipment includingalternate POS terminal processing equipment such as InternationalVeriFACT and Hypercom, among others, are contemplated for use by thepresent invention. Additionally, the present invention can be interfacedwith network computers, commonly referred to as “NC's”. NC's are lowerend computers for the limited use of Internet access which are easilyadapted for POS Electronic Checking and other money transfersanticipated by the present invention.

Communications links from point-of-sale terminals to the centralcomputer of the present invention will typically be in the form oftelephonic network communications over a public switched telephonenetwork (“PSTN”) or over other approved networks. Internet access isalso supported by the present system where access is deployed at amerchant POS for consumer payments. Internet access may also be utilizedto process Electronic Checking inquiries from points other than the POSto conduct Transaction Events under the present invention between themerchant and the consumer as a merchant-initiated payment option. As theuse of personal computers become more prevalent at the POS, utilizationof the Internet to interconnect for approvals and capture for settlementof Electronic Checking events between a system subscriber and anaffected consumer will become more routine. Transaction Eventverification will occur as a result of point-of-sale terminal access tothe Central computer's positive and/or negative data files. “Approved”or “Declined” notifications are returned to the “Point-of-Sale” deviceover the PSTN. All data files will be centrally located and maintainedon the invention's central computer databases. Portions of the databaseinclude, but are not limited to, third party data files such as theShared Check Authorization Network (“SCAN”) (trademark) database.

Individual transactions or groupings of transactions are first approvedby soliciting an “Authorization” prior to capturing a Transaction Eventfor electronic funds transfer. To maintain an accurate status of fileinformation for authorizations to subscribing merchants, businesses,and/or individuals, the system is comprised of three separate butinteractive databases, including a “Merchant,” “Checkwriter,” and“Transaction” database, which are continuously maintained. The“Merchant” database stores records of all service subscribers authorizedto initiate Electronic Checking requests. These records include, amongstothers, authorization and initiation codes, as well as the systemsubscriber's name and address. The “Checkwriter” database is a databaseof “Known” users. This database stores information that includes,amongst others, a status field indicating whether the Checkwriter wouldbe “Approved” or “Declined.” Previously unseen Checkwriter MICR strings,when “Approved”, are also added to the “Checkwriter” database for futureinquiries to the system. The “Transaction” database processes inquiriesas well as stores the transaction records of “Approved” responses forformatting and electronic settlement through the ACH or similarfacility. Current card holder or checkwriting records are updated dailyand instantly available for point-of-sale inquiry for Transaction Eventauthorizations.

System subscribers point-of-sale equipment is interfaced to the centralcomputer of the present invention by means of a telephonic network whichis able to support communication from a plurality of point-of-saleterminals. Programming of the point-of-sale terminal causes an automatic‘Dial-Up” to the central computer and provides an automatic query andresponse sequence affirming or denying the Transaction Event. EachTransaction Event which is “Approved” is captured for electronicsettlement within the transaction database log of the present system.The addition of local entry hubs may be installed to better facilitatethe speed or economics of communications with the data files.Alternatively, the use of satellite or cellular communications orenhanced radio transmissions instead of telephonic networks may also beused. Similarly, the system's data files and associated CheckReplacement Service are contemplated to be responsive to emergingpoint-of-sale devices intended to seek authorizations and/or improvedconsumer identification and security by the alternate means of voicepattern recognition, POS fingerprint identification, retina scan,geometries, biometrics, “smart” chips, consumer or check imaging and/orsignature broadcasting. The present system further contemplates use ofimaging technology as an enhancement to facilitate POS consumeridentification and electronic settlement for “Approved” TransactionEvents. Imaging technology comprises capturing an impression of aconsumer's check or a “signature capture” followed by electronicsettlement of the consumer's account.

The present system further comprises extensive system approval and fraudprevention capabilities. The system processes Transaction Events under avariety of different service types, each defined at the discretion ofthe system subscriber. The resulting flexibility enables the merchant torespond to his/her relative “comfort level” with a particularTransaction Event or consumer. Typical service types include (i) “AccessOnly” wherein the inquiry bypasses the present system's approvalcriteria but the Transaction Event, including all consumer accountinformation, is automatically captured and logged within the transactiondatabase for an electronic settlement attempt; (ii) “Check Replacement”which seeks the systems transaction “approval” and, where “Approved”,captures the Transaction Event for electronic settlement; (iii) “CardAcceptance” which operates in a manner virtually identical to “CheckReplacement” as mentioned above, but the Transactions Event is activatedthrough the use of an encoded card (versus a specimen check); or (iv)“Authorization Only” which seeks the system's approval providing asystem subscriber information regarding the reliability of a subjectconsumers account, but does not capture the Transaction Event forelectronic settlement. In the “Access Only” service type, “Access Only”events bypass the, database records and all other approval and searchcriteria such as those explained below, e.g., velocity controls, socialsecurity checks, and scans. It is contemplated that these “Access Only”events always be “Approved” and passed immediately to a settlement logfor an attempted consumer debit and service subscriber credit.

The present invention has the additional capability to use a consumer'sSocial Security Number to perform a variety of identification and fraudpreventative applications prior to issuing an “Approved” message for theTransaction Event. These include searches employing Social SecurityNumber first to validate the consumer's Social Security Number as agenuinely issued number. Second, the system cross searches the system's“Dead File” to screen out Social Security Numbers which, while validlyissued, were issued to individuals now reported as deceased. To agreater extent, verification and “Dead File” searches deter access byconsumers attempting to use false identification. Lastly, the presentsystem utilizes Social Security Numbers to cross search all “Known”checkwriter banking account records for negative information beforeissuing an “Approved” message for the subject Transaction Event. Thiscapability more fully insulates the system and its system subscribersfrom abuse and susceptibility to repeat abusers who would commonly seekto process Transaction Events from a multiplicity of banking accounts.

Entry of a consumer's Social Security Number is performed by input ofthe number from the keypad of a POS terminal used to process TransactionEvents. Alternately, the system also supports the use of a pinpad orsimilar device, interfaced with the POS terminal, for consumer entry ofa Social Security Number. This capability supports a consumer'spreference for complete privacy as to the entry of pertinentinformation. Consumers accessing the system by means of a previouslyissued encoded card will have already logged their Social SecurityNumbers onto the system's database, and, therefore, would not berequired to re-enter their Social Security Numbers or other pertinentinformation.

The present invention is also equipped with velocity controls whichregulate approvals within prescribed purchase limits imposed upon eitherthe system subscriber or a consumer. The present invention has thefurther flexibility to differentiate between “first time” consumer usageand those limits otherwise assigned to “known” consumer accounts.Merchant variations in velocity limits can also be imposed dependingupon the type, nature, and consumer purchasing statistics for aparticular merchant category or location.

Inquiries seeking an “Approved” response for a Transaction Event whichmeets all other criteria of the system's approval process, includingvelocity controls, and when involving previously unknown bankingaccounts but carrying verified Social Security Numbers which haverevealed no negative information following a cross search of thedatabase and where the numbers are also not entries in the “Dead File”,are “Approved”. Consequently, each consumer's banking account and SocialSecurity Number, along with other information, is automatically loggedinto the “Known” checkwriter database of the present invention at thetime the “Approved” response is transmitted to the inquiring POSterminal. In addition to other identification and fraud preventativemeasures, the system's access to Social Security Numbers significantlyimproves settlement features relating to matters of proper authoritywhen “Approved” and captured Transaction Events are transmitted to theconsumer's financial institution for settlement in the form ofelectronic debit and credit notations.

The system further contemplates other fraud and enhanced identificationcapabilities. These include, but are not limited to, reliance upon suchevolving technologies as fingerprint capture and analysis, signaturecapture and verification, imaging technology, retina scan, biometrics,and other forms or manners of improved identification practices as sucheither currently exist or as such may, upon further development, bereadily integrated in to the system of the present invention.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1—System overview of the present invention

FIG. 2—The point-of-sale equipment

FIG. 3—The Central Computer System

FIGS. 4-7—The process Data Flow

FIG. 8—transaction Event Sales Slip

FIG. 9—manual Transaction Event Sales Slip

DEFINITIONS

For purposes of the description and claims relative to the system of thepresent invention, the following terms shall have the meanings set forthbelow. The following definitions are applied throughout thisapplication.

Card Acceptance: A service sponsored by the present invention whichenables an encoded card to be utilized to access the central computerand thereby denote the subject consumer banking account to beelectronically debited in a point-of-sale Transaction Event.

Authorization Only: A service made available under the present inventionas a convenience to its service subscribers where the subscriber canverify the current status of the subject consumer's account. In thepreferred embodiment, these events are not captured for electronicsettlement.

Check Replacement Service: This is a service sponsored by the presentinvention which enables a consumer's specimen (“paper”) check to beutilized to access the central computer of the present system therebydenoting the consumer banking account to be electronically captured andsettled by presenting a debit notation through the facilities of theACH, or other competing service, for a purchase conducted from a systemsubscriber's point-of-sale.

Access Only: This is a service sponsored by the present invention whichenables a consumer's specimen (“paper”) check to be utilized to accessthe central computer of the system thereby denoting the consumer bankingaccount to be electronically captured and settled by presenting a debitnotation through the facilities of the ACH, or other competing service,for a purchase conducted from a system subscriber's point-of-sale.

Electronic Checking: This is a service sponsored by the presentinvention which collectively enables a system subscriber toelectronically debit funds from the consumer's bank account and creditto those funds to the system subscriber's account utilizing varioustransaction methods and banking rules as envisioned above.

DESCRIPTION OF THE PRESENT INVENTION

Referring to FIG. 1 an overall schematic of the present invention isdescribed. Point-of-sale terminals 300 communicate over normal PSTNtelephone lines with a central computer system 302 which in turncommunicates with a Banking institution 304 for purposes of debitingconsumer accounts and crediting system subscriber accounts. The bankinginstitution performs its function via normal automated clearing house(“ACH”) transactions 306 or other competing facility as mentioned above.Alternatively, the system can automatically generate preauthorizeddrafts to debit consumer checking accounts where more expeditious insettling a particular Transaction₁₃Event. This manner of settlementparticularly addresses the “first-time” consumer whose account mightotherwise require pre-notification preceding the processing of a “live”debit event. Pre-notification is to become volitional in 1996 which,when effective, will minimize the present system's reliance upon or useof drafts as a mechanism for settling consumer payment requests.

Referring to FIG. 2 the point-of-sale equipment is described. Thepoint-of-sale terminal comprises several different entry means. A keyboard 310 can be used to input consumer information manually, includingboth bank routing and consumer account information. The key board 310allows the system subscriber to input information such as (i) electronicchecking requests, (ii) a void procedure for incorrect, returned, orcanceled events, (iii) a preauthorization inquiry for the status ofconsumer accounts, and (iv) accessing system subscriber's daily activityreports. Alternatively a card reader 312 can be used whereby themagnetic strip on the card is read by the point-of-sale terminal toobtain account information and finally a check reader 314 mayalternately be included to read the MICR encoded bank and accountnumbers which appear on a consumer's specimen check as a substitute foreither a specific card or key board input. These various input meansprovide information to a microprocessor 316 which comprises logic means318, memory means 320, and communication means 322. The logic means 318comprises logic which allows the information received from the variousinput means to be processed and stored in the memory 320. The logicmeans further drives a display 324 which provides a visual output of thebank and account numbers of the consumer for verification. Thecommunication means 322 allows the subscriber terminal to communicatewith the central computer 302 for purposes of processing the consumer'spurchase. The communications means 322 is compatible with ECR and PCsystems.

Referring to FIG. 3 the central computer system 329 is described. Thecentral computer system receives input from a plurality of point-of-saleterminals which provide transaction information from a system subscriberand a consumer desiring to purchase goods or services. The centralcomputer system comprises a system subscriber 330 file which is a fileof those merchants who have elected to use the present invention forprocessing purchases. The system subscriber 330 comprises the “Merchant”database which, as previously stated, stores records of all servicesubscribers authorized to initiate Electronic Checking requests,including authorization and initiation codes, and the systemsubscriber's name and address. The central system also comprises knownconsumer file 332 which stores the account information and names ofthose consumers who have already been approved for purchases to takeplace through various input means. The consumer file 332 comprises“Checkwriter” database. Additional databases are relied upon by thesystem which assist in approving consumer Transaction Events including,but not limited to, the SCAN (Trademark) database, MOD-10 verification,Social Security Number database, and other proprietary screeningcriteria which serve to approve, decline, or reject, the latter servingto cancel those inquiries which are inaccurate, incomplete, or containfraudulent data received by the central computer. The “Transaction”database is another such database provided by the system.

The system of the present invention further comprises a third databasedefined as a transaction database which stores all activity that isconducted between the plurality of terminals and the central terminals.Those inquiries captured for a settlement attempt are converted by thesystem for ACH file for preparation and settlement. Inquiries either“DECLINED” or for various reasons rejected are similarly retained by thetransaction database. The “DECLINED” or other rejected inquiries arewithheld from transfer for settlement.

The computer system also comprises a communications means 334. Thecommunication means is capable of communicating with other external,third party databases to allow the system access to review additionalnegative records regarding the consumers' banking account prior toissuing an “Approved” response. Once an “Approved” response is given fora Transaction Event involving a consumer banking account previouslyunknown to the system, the newly “Approved” consumer record isautomatically added to the system's checkwriter database. This newrecord allows for the entry of the consumer's new address and phonenumber information.

As presently configured the central computer 329 already houses thethird party database known as the SCAN (trademark) database 333 residenton the central computer. Thus credit worthiness can be checked using allcurrent database criteria searches, and further benefit by immediateaccess to the records from the SCAN (trademark) database. All databases,including proprietary databases and SCAN (trademark) databases, areupdated daily.

The communication means 334 also transmits ACH files which are createdby the system and communicated with a banking institution 338, includinginstructions for the bank to debit the account of the consumer andcredit the account of the system subscriber (merchant), with the amountof the purchase. These transactions are then settled via the “Off-Line”ACH transaction process. The system of the present invention alsocontemplates the use of “On-Line” settlements.

Referring to FIG. 4 the process begins by a consumer presenting anencoded card or a specimen or “blank” check complete with MICR number tothe system subscriber (the merchant) 100. The subscriber begins theprocess by first pressing the appropriate key on a terminal to select aparticular service prior to accessing the host computer 108. Thereafterthe point of sale terminal prompts the system subscriber to enter theappropriate MICR number 110. The system subscriber then enters theappropriate MICR number either manually or by passing the card through amagnetic stripe reader on the terminal or the specimen check through acheck reader which determines the consumer's bank and account numbers112.

Referring to FIG. 6 the subscriber would verify that the numbersappearing on the terminal's display screen match the numbers on theencoded card or the MICR numbers on a consumer's check 114. If thenumbers do not compare with that of the terminal the system subscriberclears the terminal and begins the transaction process again 118. If theprocess is to be reinitiated, the subscriber enters the MICR or cardnumber(s) into the point of sale terminal 130. Thereafter the systemsubscriber compares the numbers as before 132. If the numbers compare tothe system display 134 the process proceeds. If the numbers do notcompare 136 the check or card is returned to the consumer and theprocess terminates 137.

Upon a successful reading of a consumer's specimen check, the check isnumber embedded thereon id also captured and, once communicated to theSystem Central Computer, retained for future reference purposes orsecurity matters, such as consumer inquiries or verification of properauthority. Access to the check number proves critical when performing asequence review to resolve such matters.

Referring to FIG. 5, if the verification process proceeds, the terminalnext prompts the system subscriber to enter the amount of the sale 122and other security or identification information required. Thesubscriber enters the amount of the sale along with requestedinformation 124 and the terminal thereafter transmits an inquiry to thehost database for verification 126.

The check or card approval process next takes place 128. If the inquiryis not approved by the central computer the terminal displays a messagedeclining or rejecting the transaction 140. Thereafter, printer recordof the declined or rejected transaction is made for purposes of thesystem subscriber 142 to comply with the Fair Credit Reporting Act andRegulation of the Board of Governors of the Federal Reserve System.

If the card or check is approved, the terminal displays a message notingthe approval 138 and the specimen card or check is returned to theconsumer. The printer further makes a paper record of the transaction142 and the consumer places any required information on the paperreceipt and signs the receipt expressly authorizing the transaction 144.At the election of the system subscriber, or at the request of theconsumer, the consumer may write the check which would then be stamped“Void” or “Electronically Settled” and thereafter returned to theconsumer or submitted to lock box or other storage facilities. Thisprocedure is used for security measures or where fraud and/or databasesearches (which rely on the cancellation of a specimen check) arecontemplated.

Referring, to FIG. 7, the process description continues. Once thetransaction is “Approved”, the central computer makes a record of theMICR information and other data captured at the point-of-sale, includingthe sale amount, permanently storing all the information 146. Uponcloseout of a terminal's batch of daily Transaction Events by a systemsubscriber, the system's central computer reformats the capturedactivity within its transaction database to ACH format and thereafter,at regular intervals, transmits all of the daily batch activity forevery system subscriber into the ACH network as debit and creditnotations. The central computer subsequently generates a batch messageregarding all Transaction Events for the prior period and transmits allthe Transaction Event information for the day into the ACH network 148.

During the ACH process each Checkwriter's account is debited for theexact purchase amount 150. Thereafter, collected funds representing thetotal of a day's activity, being the aggregate of all Transaction Eventsprocessed for consumers by the system subscriber, are deposited into asubscriber's designated account 152. The transaction is then complete154.

How to use

The present invention will require the establishment and maintenance ofthree interconnected but separate data files for the purpose ofperforming access searches. The system embodied by the presentinvention, and the interactive databases comprising the system, areaccessible by dial-up communication procedures from point-of-sale(“POS”) terminal devices, electronic cash registers, and/or personalcomputers similar to the equipment utilized in the processing ofautomated bankcard (“credit card”) receipts. The terminal prompts anoperator/user to process one of four optional inquiry types. Any one orall of four primary functions are capable of being performed at a singlepoint-of-sale terminal within the control of the system subscriber. Theinquiry types and database responses for “Approved” Transaction Eventsare as follows:

Card Acceptance—Having depressed the assigned key and thereafter beingprompted, the system subscriber “slides” an encoded magnetic strippedtransaction card through the point-of-sale terminal and enters the “SaleAmount” requested for authorization. Thereupon, the terminal's dial-upcapabilities direct the inquiry to the central computer forauthorization against “KNOWN” (Positive and Negative” file of currentcardholders). Inquiries where a “POSITIVE” “Match” are found and wherethe cardholders' status fields are listed in “good standing” cause an“Approved” return message from the data file to the inquiring POSterminal. In order to accomplish this the present invention's databasecaptures each new MICR string for future reference. Embedded within thedata record is a notation identifying the “Status” for that account. Inthis manner, if a certain signal is generated, for instance a “Y”, thenthe account would be “Approved” for future access to the system.Conversely, a “No-Match” to inquiry or a “Match” where the cardholder'sstatus field were listed in “bad standing” would result in a “Declined”notice to the POS terminal. Daily input to the system for the presentinvention causes automatic updating of status fields for all cardholderfiles including the activation of new cardholder accounts, the placementof corrective status entries (“Positive” or “Negative”) into the statusof existing cardholder files, deletion of terminated accounts or tochange other file status in existing accounts. In the case of a“No-Match” the system of the present invention would generate adifferent signal such as a “No” and the “Account would be “Declined”upon an attempt to access the system.

Authorization Only—Having depressed the assigned key and thereafterbeing prompted, the system, subscriber manually enters account numbersfrom a personal or business check or, where fully automated, enters aspecimen check through a MICR Check Reader device interfaced with theterminal, whereupon the terminal's screen would display the check's bankand account numbers for verification. Thereafter, the operator wouldenter the “Sale Amount” and other security or identification informationrequested for authorization. The terminal's dial-up capabilities thendirect the inquiry to the computer data file center for authorizationfirst against the “Known” file of checkwriting records whereupon thecurrent status field is verified. A successful “Match” to an inquiry,where the current status field lists the checkwriter record as in “goodstanding”, would result in an “Approved” notice from the centralcomputer to the inquiring terminal. Conversely, a successful “Match” toan inquiry, where the current status field lists the checkwriter recordas not in “good standing”, would result in a “Declined” notice from thecentral computer ti the inquiring POS terminal. Each inquirypreliminarily resulting in a _“No-Match” (first time user) whenprocessed against the system's “Known” checkwriter's database would thenbe passed through any and all available third party databases whichreside on or are available to the system by external link preceding anyreturn notice to the inquiring terminal. This third file is anticipatedto be the Shared Check Authorization Network (“SCAN”) a negativedatabase currently maintained in the system computer data file center orother databases.

Check Replacement Service—Inquiries initiated as Checked Replacementinquiries are first processed through the system's “Known” checkwriterdatabase and, as necessary, thereafter proceed to the SCAN database, orother database files, prior to the issuance of an “Approved”,“Declined”, or a rejection message to the inquiring POS terminal. A“Match” in the system's checkwriter database records indicates aconsumer account which is “Known” to the system. If a “Match” is foundand where the checkwriter's status field within the database is listedin “good standing”, an “Approved” response results. Conversely, a“Match” where the checkwriter's status field were listed in “badstanding” would result in a “Declined” notice. Reliance upon accountinformation available from SCAN or any other positive or negativedatabases minimizes the risk associated with the system's approval ofTransaction Events involving consumer accounts which are previously“Unknown” to the invention's proprietary “Known” checkwriter database. AMatch” in the SCAN “NEGATIVE” file would result in a “Declined” responseto the inquiring terminal. Where a “No Match” should occur, and subjectto the receipt of no other negative information received from the systemcriteria searches or from alternate databases, the event would be“Approved” as a “first-time” consumer user. Negative informationreceived from SCAN or the rejection of the Transaction Event for otherreasons would result in a “Declined” or one of various reject responsesto the POS terminal. Daily input to the system of the present inventioncauses automatic updating of all checkwriter records and the placementof corrective entries (“Positive” or “Negative”) into the status fieldsof existing checkwriter files. Each newly captured, but previously“Unknown” accounts, would, subsequent to an “Approved” notice, beautomatically entered into the system's “Known” checkwriter file. CheckReplacement Transaction Events are captured by the system and loggedwithin its transaction database. The total of daily, “Approved”Transaction Events are “paperless” sales whereby the service subscribingmerchant has submitted requests for electronic debit via the ACHnetwork, or other competing facilities for each such authorized consumerpurchase. Commercial bank drafts (“paper” checks) are not accepted orprocessed by the service subscriber. For each “Approved” TransactionEvent, a “Sales Receipt” is manually prepared or is automaticallyprinted at the point-of-sale. The consumer provides expressauthorization for an electronic debit by signing individual salesreceipts.

Access Only—Access Only Transaction Events are processed in essentiallythe same manner as Check Replacement events with one significantvariance. Access Only events bypass the authorization criteria withinthe system's central computers established for approving CheckReplacement events and are automatically captured within the system'stransaction database for a settlement attempt. All other functionalityaspects of an Access Only and a Check Replacement Transaction Eventremain identical.

All terminal programming and all prompt strings for MICR Check Readerinterfacing are stored in the POS terminal and the computer center ofthe present invention controls interactions between the plurality ofterminals and the central system. The following modules are present.

Programming for POS Equipment Interface—system subscriber locations tobe activated with the present invention must possess or acquire a Tranz(trademark) 330 or higher grade terminal or alternate terminals,personal computers, or approved electronic cash registers supportinginterface capabilities with a MICR check reader.

The MICR check reader interface results in the reading and transmittingto a terminal, in accepted format, of the consumer's entire ABA/Transit,checking account, and specific check number information which whencombined with other data keyed directly into the terminal results in aquery to the system's central computers. Subsequent to a terminalsreceipt of the banking account numbers, the terminal's will display thenumbers on its screen allowing the operator to verify the accuracy ofthe captured “read” prior to proceeding. If the consumer's accountnumbers are correct, the Transaction Event may proceed, or, whereincorrect, the operator can “clear” the event and resubmit theconsumer's specimen check through the check reader. Alternately, theconsumer's bank and account numbers and other requested information maybe manually entered directly into the terminal with all other financialand operational advantages of the present invention remaining in effect.

The computer data file center receives and processes Transaction Eventauthorization requests utilizing the entire MICR string for accurate,error-free identification of both the consumer bank and a specificchecking or depository account to participate in a sale. ACH settlementcriteria mandate exact recall for the bank and checking account numbersto properly complete any debit request. This invention conforms to eachand every requirement of the ACH transaction regulations including allpending guidelines and/or proposals and rules changes regardingprocessing requirements or new classification or submittal types.

The present invention assigns a unique identifier(s) for purposes ofaccurately identifying individual MICR accounts and Transaction Events.To this end, each new event captured on the “Checkwriter” database isconsecutively assigned a unique 15 character account number,checkwriter. This unique same checkwriter identifier is thereafterprinted on future receipts for subsequent transactions processed.

Additionally, upon entry of media information from one receipt, anadditional code, such as a sixteenth character, is automaticallyassigned by the present invention. The sixteenth character indicatesthat the subject MICR account is “known” and “registered” on the system,thereby alleviating the need to supply a Checkwriter's name, address,and phone number on subsequent transaction receipts.

A second unique identifier is assigned to distinguish an individualTransaction Event approved by the system. For purposes of settlement, orother inquiries, this numerical identifier may be employed to recoverall salient information pertaining to the Transaction Event,Checkwriter, and the service subscriber. It is also contemplated thatunder certain circumstances, the check number can be used in lieu of aunique identifier to effect settlement and credit of the TransactionEvent. Both identifiers (i.e., Checkwriter and event) are retained bythe system and printed on the customer's transaction receipt. Moreover,the unique identifiers' satisfy the requirements for the preparation andsubmittal of electronic debit and credit notations through the ACH inconformance with Federal regulations.

Each Transaction Event is completed with the logging printer generationof a Transaction Event (“Sales”) Slip for each “Approved” authorizationinquiry processed (FIG. 8). Alternatively, a manually createdTransaction Event slip can also be prepared (FIG. 9). Each suchTransaction Event Slip must be exacting in its retention of accountnumbers and the sale amount enabling both the consumer and systemsubscriber to be provided “hard copy” receipts of the event. Alsoincluded would be a clear printing of the transaction type; “CardAcceptance,” “Authorization Only” (as appropriate), “Check Replacement,”or “Access Only”. Authorization language is printed immediatelypreceding the consumer's signature line specifically authorizingelectronic access in payment of the requested transaction sale amount.

Instances will arise where previously “Approved” Transaction Events willrequire the operational equivalent of a “Void” or “Credit” procedure.The system of the present invention enables communication by a servicesubscriber with the central computers to effect such correctiveadjustments to prior events. By way of example, a “Void” may beinitiated by depressing the assigned key on a service subscriber's POSterminal and, once complying with security prompts, the POS terminalwill thereafter communicate with the system's central computers and makesuch requested corrections. In the event of a “Voided” TransactionEvent, a separate “Voided” slip will be automatically printed as apermanent record.

In addition to the primary functions for POS equipment programing, eachPOS terminal/MICR interface processing location is capable of generatingprinted activity reports. Activity reports can be printed in eithersummary or detail formats identifying all “Approved” Transaction Eventsby service type, approval number, and amount. Reports further providethe total number of events “Approved” and the total captured amount ofconsumer payments contained within the activity report. Events whichwere previously recorded on the system's central computers as “Approved”but which have been subsequently “Voided” are also identified, includingdetail of the originally “Approved” events, with the amount of such“Voided” events deleted from the activity report's total for thecaptured amount for all Transaction Events.

Summary

A flexible, transaction processing system is described which permitspoint-of-sale electronic checking events to be conducted in a“paperless” manner thereby eliminating the necessity of a servicesubscriber accepting or processing commercial bank drafts (“paper”checks) otherwise presented by consumer's in payment for goods orservices. Individual Transaction Events are submitted to the system'sdatabase for approval in an automated manner and, where “Approved”,captured for electronic settlement. Thus, consumer payments initiatedfrom a service subscriber's point-of-sale are electronically debitedagainst the banking account of the consumer and credited to thedesignated depository account of the service subscriber. Among thenumerous advantages of the current invention, consumers are providedaccess to their banking account funds, but service subscribers are nolonger required to accept or process commercial bank drafts (“paper”checks). Transaction Events captured by the system are settledelectronically by the submission of credit and debit notations throughthe facilities of the ACH network or any competing network. Departuresfrom the proposed system, especially with respect to modifications tothe system's service types or the point-of-sale equipment employed willbe apparent to those skilled in the art without departing from thespirit of the invention as described. For example, variances in servicetype such as “ECK,” “RCK,” “Check Truncations,” and “Electronic CheckPresentment” which enables Electronic Checking events to be processedfrom a merchant's point-of-sale system are also contemplated by thepresent invention.

What is claimed is:
 1. A method of authorizing the debit of funds from abank account without negotiating a check, comprising: inputting payerbank account information into a point of sale terminal; inputting atransaction amount into said point of sale terminal; printing anauthorization to debit payer's bank account by an amount equal to thetransaction amount for the payer's signature; and debiting said payerbank account by an amount equal to the transaction amount by electronicfund transfer.
 2. The method of authorizing the debit of funds from abank account without negotiating a check of claim 1, wherein the payerbank account information is input into the point of sale terminal by amethod selected from the group consisting of: manually keying theinformation, MICR reading of a payer check, OCR reading of a payercheck, magnetic stripe reading of a payer debit card, and electronicreading of a payer smart card.
 3. The method of authorizing the debit offunds from a bank account without negotiating a check of claim 1,further comprising checking payer information on a database to determinewhether to continue a transaction prior to printing the authorization.4. The method of authorizing the debit of funds from a bank accountwithout negotiating a check of claim 1, wherein the payer is selectedfrom the group consisting of consumers and businesses.
 5. The method ofauthorizing the debit of funds from a bank account without negotiating acheck of claim 1, wherein said electronic fund transfer is performedoffline by one of the group consisting of ACH and Federal Reservesystem.
 6. The method of authorizing the debit of funds from a bankaccount without negotiating a check of claim 1, wherein said electronicfund transfer is performed online by one of the group consisting of ACHand Federal Reserve system.
 7. The method of authorizing the debit offunds from a bank account without negotiating a check of claim 1,wherein payer bank account information is supplied by a payer check anddisposition of the check is by one of the group consisting of: returninga blank check to the payer, returning an incomplete check to the payer,returning a completed and voided check to the payer, retaining anincomplete and voided check, and retaining a completed and voided check.